Minnesota has joined the growing number of jurisdictions that have enacted paid family and/or medical leave programs for employees.¹  On May 25, 2023, Governor Tim Walz signed HF 2, a Paid Family and Medical Leave (PFML) bill, which will provide employees up to 20 weeks of PFML per year.  The program will be administered by a new Family and Medical Benefit Insurance Division (the “Division”) of the Department of Employment and Economic Development (DEED).  Employers and employees will contribute to a state fund that will support the program. 

When Does the Statute Take Effect?

Workers may begin to take PFML on January 1, 2026, at which time workers and employers also begin paying into the fund.  Certain portions of the statute will be implemented before this date so the state can build the necessary infrastructure to administer it by the official start date.

Who Is a Covered Employer?

The statute applies to employers regardless of their size, and regardless of the number of employees located in Minnesota.

Who Is an Eligible Employee?

All Minnesota employees, with limited exceptions, will be eligible for PFML benefits if they meet the financial eligibility requirements under the law.  Certain seasonal employees are excluded from coverage under the law.  Additionally, self-employed individuals and independent contractors are excluded but may elect to purchase coverage under the program.

To receive benefits, an employee must have earned at least 5.3% of the state average annual wage over their base period, defined as the most recent four completed calendar quarters before the employee’s application for benefits.  Currently, this amounts to annual earnings of about $3,500.  The employee can aggregate wages earned from multiple employers to satisfy the financial eligibility test.

For What Reasons May an Employee Use Paid Leave?

Coverage falls into two categories: (1) leave for the employee’s own serious health condition; and (2) other leave, including family care, bonding, safety, or qualifying exigency, defined as follows:

• Bonding leave is time off for a biological, adoptive, or foster parent to spend time with a child in connection with the birth, adoption, or placement of that child.  Employees must take bonding leave within 12 months of the birth, adoption, or placement of the child, except when the child must remain in the hospital longer than the birthing parent, in which case the leave must end within 12 months after the child leaves the hospital.  In adoption situations, employees may use bonding leave for various issues connected with the adoption process.

• Family care leave is time off to care for a family member with a serious health condition or to care for a family member who is a military member.

• Safety leave is time off because of domestic abuse, sexual assault, or stalking of the employee or a family member to seek medical attention, victim services, counseling, relocation, or legal advice.

• Qualifying exigency leave is time off due to a military member’s active-duty service or notice of active duty, including caring for the family member’s child or dependent, making financial or legal arrangements, attending counseling, attending military events or ceremonies, spending time with the family member during a rest and recuperation leave or following return from deployment, or making arrangements after the death of a military member.

A serious health condition is defined as a physical or mental illness, injury, impairment, condition, or substance use disorder that involves inpatient or outpatient care or continuing treatment or supervision by a health care provider involving various types of incapacity for a specified period of time as specified in the new law.

While the definition of family member is not as broad as that included in the new Earned Sick and Safe Time statute, it includes a spouse or domestic partner; sibling; grandchild; grandparent or spouse’s grandparent; son- or daughter-in-law; child (including biological, adopted, or foster child, stepchild, or child to whom the applicant stands in loco parentis, is a legal guardian, or is a de facto parent); parent or legal guardian of the applicant (including biological, adoptive, de factor, foster, or step-parent, or legal guardian or individual who stood in loco parentis to the applicant when the applicant was a child); and an individual who has a relationship with the applicant that creates an expectation and reliance that the applicant care for the individual, whether or not the applicant and the individual reside together.

Except for benefits for bonding leave, a claim for benefits must be based on a single qualifying event of at least seven calendar days.  The days must be consecutive unless the leave is intermittent.

How Much Paid Leave Time May an Employee Take?

An employee may take up to 12 weeks of paid leave for their own serious health condition and up to 12 weeks of paid leave for bonding, family care, safety, or a qualifying exigency. However, employees are limited to an aggregate of 20 weeks of paid leave in a benefit year. In other words, if an employee has used the full 12 weeks of serious health care leave, the employee could take only eight more weeks for the other types of leave.  Conversely, if an employee took 12 weeks of bonding and family care leave, the employee would be limited to 8 weeks of serious health care leave.

An employee may take leave intermittently for any of the covered reasons under the law. However, an employer may limit intermittent use of leave to 480 hours in any 12-month period.  The employee would be able to take any remaining leave continuously. 

The minimum duration of benefits is one workday in a work week.

How Much Pay Will Employees Receive?

Employees will not receive their full wages for PFML.  The state will apply a maximum weekly benefit amount computed by statute.  An employee’s weekly benefit is calculated by applying the following percentage to the employee’s average typical workweek and weekly wage during the high quarter of their base period:

• 90% of wages that do not exceed 50% of the state’s average weekly wage; plus
• 66% of wages that exceed 50% but are less than 100% of the state’s average weekly wage; plus
• 55% of wages that exceed 100% of the state’s average weekly wage.

Benefits will be paid weekly.  The weekly benefit amount will be prorated when:

• The employee works hours for wages;
• The employee uses paid sick leave, paid vacation leave, or other paid time off that is not considered a supplemental benefit payment; or
• Leave is taken intermittently.

An employee may use vacation pay, sick pay, paid time off, or disability insurance in lieu of PFML benefits if the employee is concurrently eligible.  Such time off would be protected but would render the employee ineligible to receive PFML benefits from the state.  Likewise, employees are ineligible to receive PFML benefits for any week they are receiving payments related to the separation from employment (such as severance pay) or Social Security disability benefits (except in certain limited circumstances). Receipt of workers’ compensation does not wholly render an employee ineligible to receive PFML benefits, but the state will reduce the amount of PFML benefits paid by the amount of the employee’s workers’ compensation payment.

An employer may choose to designate certain benefits such as salary continuation, vacation leave, sick leave, or other paid time off as a supplemental benefit payment, which can be used to “top off” the amount of PFML benefits received so that the employee receives their regular wage or salary. Employees may choose – but cannot be required – to use supplemental benefits concurrently with their PFML.

How Will Employees Obtain Benefits?

To obtain benefits, an eligible employee must file an application for benefits and establish a benefit account with the new Division.  Benefits will be paid from state funds, not directly by the employer.  Any agreement between an employee and employer is not binding on the Division in determining whether the employee is entitled to benefits.  The application may be filed up to 60 days before leave is taken.  It must include certification supporting the request.  

Similar to Washington’s paid family and medical leave program, it appears the Division will determine whether employees are eligible for PFML rather than the employer, as is typical under the federal Family Medical Leave Act. The Division will notify the employer of its determination regarding entitlement to benefits, although it appears the employer may have some ability to appeal a determination. 

What Notice Must the Employee Provide to the Employer?

The employee must provide at least 30 days’ advance notice to the employer if need for leave is foreseeable.  Otherwise, the employee must give notice as soon as practicable.  The employee need only provide notice once, but the employee must advise the employer as soon as practicable if dates change.  The employee must provide at least oral, telephone, or text message notice sufficient to make the employer aware of the need for leave and anticipated timing.

May an Employer Offer a Private Plan Instead of Participating in the Public Plan?

Yes.  An employer may offer a private plan, so long as that plan provides benefits and protections that are the same as or greater than those provided under the public plan and is approved by the Division.  A private plan can be self-insured or insured through a carrier.  An employer with an approved private plan need not pay the tax premiums required by the statute, but it must pay a private plan approval and oversight fee.  The employer must post notice of the private plan for its employees.

What Premiums Must an Employer Pay?

Employers must pay quarterly premiums to the family and medical benefit insurance account on the taxable wages paid to each employee.  Beginning January 1, 2026,² the employer premium rates shall be:

• 0.7% for an employer participating in both family and medical benefit programs
• 0.4% for an employer participating in only medical benefit programs with an approved private plan for the family benefit program
• 0.3% for an employer participating in only the family benefit program with an approved private plan for the medical benefit program

Employers must pay at least half of the annual premiums.  Employees, through a wage deduction, must pay the remaining premium not paid by the employer.  There is a small business exclusion where employers with fewer than 30 employees will pay a reduced amount, which the fund will absorb; employees at small employers will pay the same as those at larger employers.

What State Reporting is Required of the Employer? 

Employers must electronically submit a quarterly wage detail report to the state.  The report must include information about employee wages and hours worked.  Penalties apply for incomplete or incorrect information.

May Self-Employed People and Independent Contractors Elect Coverage?

Yes.  A self-employed person or independent contractor may apply to participate in PFML.  These individuals would be required to pay their own premiums.

Are Earnings Statements Affected?

Yes. Employers must include information about amounts deducted and paid to employees for PFML on employees’ earnings statements. 

What Protections Do Employees Have?

The statute prohibits retaliation: employers must not discharge, discipline, penalize, interfere with, threaten, restrain, coerce, or otherwise retaliate or discriminate against employees for seeking, requesting, or obtaining PFML benefits or exercising other rights under the statute.  Employers are also prohibited from obstructing or impeding an application for PFML leave or benefits.  Employers may, however, require employees to comply with their usual requirements for requesting leave.  The employer may also require the employee to provide a copy of the certification.

The employer may not require the employee to identify a replacement worker to cover the employee’s work.

The employer must maintain insurance under any group insurance policy, group subscriber contract, or health care plan for an employee and the employee’s dependents as if the employee were not on leave.  The employee must continue to pay the employee share of such benefits.  The employee will be treated as if the employee continued to work for purposes of changes to benefit plans.

Upon return from PFML, an employee must be reinstated to the same position the employee held when the leave started or to an equivalent position with equivalent pay, benefits, terms and conditions of employment.  However, the employee has no greater right to reinstatement or other benefits than if the employee had remained continuously employed.  If an employee is laid off during PFML, the employer need not continue the leave, but the employer has the burden of proving the employee would have been laid off and not entitled to return to the job absent the PFML.

The employer must provide an employee who is no longer qualified for the position for certain reasons a reasonable opportunity to meet those conditions.  A returning employee is also entitled to any unconditional pay increases the employee would have received.  The employee may, but is not entitled to, accrue additional benefits or seniority during PFML.  PFML will not be treated as a break in service for purposes of vesting and eligibility to participate in pension or other retirement plans.

Violations are subject to a penalty of not less than $1,000 and not more than $10,000 per violation, payable to the employee.

Employers may also be penalized for colluding with an employee to obtain benefits fraudulently.

Is There a Private Right of Action?

Yes.  Employees may sue in federal or state court to vindicate their rights under the statute.  Remedies include pay damages, interest, liquidated damages for actions not in good faith, injunctive or equitable relief, and attorneys’ fees and costs.  The statute contemplates class relief.

What’s Next?

Employers have some time to get up to speed on the new requirements, adjust their policies, and plan for the changes to come.  In the meantime, we expect to see regulations and FAQs to provide insight into various areas of the statute that are not entirely clear. 

Anticipating January 1, 2026, employers can:

• Determine whether to apply for a private plan approval.
• Work with accounting to address the upcoming additional payroll taxes.
• Work with payroll to put appropriate infrastructure in place to support PFML and amend employee earning statements.
• Be prepared to review handbooks and policies and identify changes to be made.  This includes considering how current FMLA policies will be affected.  Given the law does not go into effect until 2026, by which time clarifying rules and other information should be published, this is not a front-burner item.

Littler will continue to monitor this new law and provide updates on any significant developments.